Freetown, SIERRA LEONE – A recent World Bank report revealed that the nascent recovery in manufacturing has been disrupted due to tightening financial conditions and a slowdown in private investment. The Sierra Leone Economic Update 2023, released last week, outlined the challenges faced by the manufacturing sector, which saw only a modest increase in growth, from 4 percent in 2021 to 4.5 percent in 2022. However, this growth is well below pre-pandemic levels.
The report highlighted the adverse effects on firms, particularly small and medium enterprises (SMEs) and entities reliant on imports. These businesses faced challenges due to higher fuel prices and increased freight costs, which rose significantly, depending on the route. Additionally, exchange rate volatility added to their difficulties.
Fuel shortages became frequent, leading to long queues at gas pumps. The increased fuel prices not only impacted manufacturers but also transportation costs. High global base metal prices further escalated expenses for the construction sector. The shortage of foreign exchange pushed businesses towards the unofficial market, resulting in increased business expenses.
Despite these challenges, the report pointed out that industrial activity remained robust, primarily due to continued growth in the mining and construction sectors. Overall industrial activity is estimated to have grown by 8.2 percent in 2022, following a significant increase of 17.4 percent in 2021 when the sector rebounded from a decline in 2020.
The mining sector significantly contributed to overall GDP growth, with the resumption of iron-ore mining operations at Marampa mines following the resolution of a long-standing tax dispute. The report noted that both large iron ore mines, Marampa and Tonkolili, have been functional for the first time since the Ebola epidemic, resulting in a 35 percent increase in production.
This development is significant, as the mining sector accounts for over 50 percent of the total industrial sector output, with the majority coming from iron ore and diamond mining, along with contributions from rutile, bauxite, and gold. Construction activity, with a 5.2 percent growth in 2022, was buoyed by high public capital spending, particularly on road infrastructure.
The report sheds light on the challenges faced by the manufacturing sector but also underscores the resilience and growth in the broader industrial sector of Sierra Leone’s economy. ZIJ/30/10/2023